Iraq bids to control Kurdistan oil revenue with contract switch – report

File – Kurdistan and Iraqi flags

SULAIMANI (ESTA) — The Iraqi oil ministry has asked oil and gas firms operating in the Kurdistan Region to sign new contracts with state-owned marketer SOMO rather than the Kurdish government, in a fresh bid to control revenues in Kurdistan, Reuters reported on Thursday.

On May 7, Iraqi oil minister Ihsan Abdul Jabbar said the ministry would proceed with implementing a federal court ruling gives the ministry oversight of oil output in the Kurdistan Region after talks didn’t lead to a result.

Abdul Jabbar said during a round-table meeting with officials in the Iraqi National Oil Co that Baghdad and Erbil didn’t reach an agreement over oil output and exports in the Kurdistan Region even after 75 days of talks.

The Kurdistan Regional Government (KRG) has been developing oil and gas resources independently of the federal government, and in 2007 enacted its own law that established the directives by which the region would administer them.

Kurdistan’s massive untapped oil reserves, lucrative production-sharing contracts and safe environment have prompted international oil companies over recent years to commit to investing billions of dollars there.

But in February, Iraq’s federal court deemed the oil and gas law regulating the oil industry in Kurdistan unconstitutional and demanded that the KRG hand over their crude supplies.

Iraq’s federal court’s ruling gives the oil ministry in Baghdad the authority to manage oil and gas fields in Kurdistan.

According to a letter seen by Reuters, the Iraqi oil ministry appointed law firm Cleary Gottlieb Steen and Hamilton to approach some oil and gas firms operating in Kurdistan to “initiate discussions to bring their operations into line with applicable Iraqi law”.

Implementing the court decision “will require changes to the contractual regime” for the companies, the letter added. Other firms received a letter directly from the oil minister, Reuters cited one source as saying.

The KRG has repeatedly rejected the federal court ruling.

The letters, which were sent on May 8, marks the first direct contact between the ministry and oil firms operating in the Kurdistan Region. The move follows years of attempts by the federal government to bring KRG revenues under its control, including local court rulings and threats of international arbitration.

The implications of the latest move are not fully clear as more than seven months since elections in Iraq, the formation of a government is still underway.

An Iraqi oil ministry legal adviser, who spoke on condition of anonymity, told Reuters that a joint government committee including representatives from the oil ministry including the minister, Iraq’s National Oil Company (Inoc) and the Federal Board of Supreme Audit (FBSA) will conduct a contractual review.

The aim is to eventually sign contracts with the central government and not the KRG, the adviser added.

An official from the Iraqi oil ministry told Reuters that the ministry had yet to receive responses from the companies concerned and could take legal measures in the case of no response.

Foreign oil firms are unlikely to engage with Baghdad directly without coordination with the KRG, Reuters cited one oil firm representative as saying.

Bewar Khinsi, a KRG prime minister’s advisor for energy affairs, said in an interview with VOA published on May 10 that the Kurdish government would not abide by the court’s ruling as it is “contrary to the constitution”.

“Baghdad doesn’t come forward to solve the problems through talks, dialogue and negotiations,” he was quoted as saying.

“Now, if an article of the Kurdistan Region’s oil and gas law is inappropriate, it can be negotiated, but to say it should be annulled, it is unconstitutional,” he added.

He further said the comments by the Iraqi oil ministry was to pressure the KRG and was related to the current political situation in Iraq.

“We won’t be affected by such pressures, but we are ready to sit down with them and solve the issues through negotiations in several meetings,” he noted.

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